PCR podcast: Covid travel restrictions and rules slow tourism rebound

The coronavirus pandemic has triggered an economic crisis such as the world has never seen. The economic downturn was followed by an unprecedented rebound. It all happened so fast. It left us with a torrent of numbers and seemingly inextricable questions.

Welcome to PCR, a special limited series by The National in which we try to make sense of the numbers and answer important questions on the Post Covid-19 Recovery.

Listen to prominent economists and business leaders as they explain the challenges and opportunities of a unique and often complex economic recovery.

Join Mustafa Alrawi, assistant editor-in-chief as he explores the many features of the Post Covid-19 Recovery.

Episode 5 : Travel, tourism and hospitality

In 1950, around 25 million people took international flights.

By 2019, there were more than 1.5 billion passengers flying to international destinations. Then the pandemic hit.

The travel and tourism industry has been one of the most affected sectors by the pandemic. Before the pandemic, travel and tourism accounted for one in four new jobs created around the world.

The pandemic has not only disrupted travel, tourism and hospitality, it has also transformed these industries.

Find out more about how these sectors are recovering and what are the new trends emerging during the Post Covid-19 Recovery.

Guests:

Tiffany Misrahi, Vice-President of Policy and Research at The World Travel and Tourism Council

Haitham Mattar, Managing Director of India, Middle East & Africa at IHG Hotels and Resorts

Narrated by: Mustafa Alrawi, The National's assistant editor-in-chief

Episode transcript:

00:06

Ladies and Gentlemen, very shortly we'll be ready for departure So, both electronic devices should be switched off please have your boarding pass ready.

Mustafa 00:22

Monday November the 8th, 2021 was certainly a special day for thousands of international passengers, as they flocked inside US airport terminals for the first time in 20 months.

The move to open borders by the US government was long-awaited by families, friends, students and professionals. For some, November the eighth 2021 was the day they were finally reunited with their loved ones. For many in the travel and tourism industry, that November morning signalled a new milestone on the long, sinuous road to post-Covid-19 recovery. Across continents and countries, the reopening of borders for international travellers has been gradual and cautious. Months before the US, travel restrictions were partially lifted in the Middle East, Africa, Europe, Latin America, the Caribbean and parts of Asia. Some countries are yet to open their borders to international travellers.

Travelling today from one country to another is still subject to terms and conditions, red and green lists, vaccination certificates and PCR tests, a reminder that the economic recovery is correlated to the pandemic – and additional proof of the travel sector’s vulnerabilities. Many recent surveys tell us that when asked about when they think the post-Covid-19 recovery started. A majority of respondents say it was when they were finally allowed to travel again. Travelling, going out to a restaurant or staying in a hotel are indeed the healthy signs of a newfound normality that was lost during the pandemic.

Welcome to PCR. I’m Mustafa Alrawi, your host on this special podcast series from The National, in which we discuss the post-Covid-19 recovery. In this episode, we’re focusing on travel, tourism, and hospitality sectors. These industries were decimated by the pandemic. But they’re slowly recovering and emerging from what looks like a cataclysmic crisis, a crisis that is also proving to be a catalyst for a sustainable and more resilient industry. Wherever you live, whether in developed or developing countries, in low or in high-income economies; north, south, east or west, the fact is that every single country relies on tourism, travel, and hospitality for both income and employment, to differing degrees. This is precisely what makes travel and tourism unique and indispensable for the entire global economy. In order to grasp why the recovery of travel and tourism is key to the global economic recovery as a whole, one should be reminded of the size of these industries at the start of the pandemic.

Ayesha 03:15

Tiffany Misrahi, vice president of policy and research, World Travel & Tourism Council:

03:21

The travel and tourism sector has been one of the worst-affected industries by the pandemic. So if you think about it, in the last five years before the pandemic, travel and tourism accounted for one in four new jobs created around the world. We accounted for 10.6% of all jobs on the planet – that’s one in 10 jobs, and 10.4% of global GDP, which was around 9.2 trillion US dollars. But the sector obviously suffered losses of almost 4.5 trillion US dollars in 2020 as a result of Covid-19 to reach about, you know, 4.7 trillion in travel and tourism contributions.

So if you think about it in percentage terms, the GDP dropped by a staggering 49.1% compared to 2019 levels. And if you think about it compared to the global economy, so global GDP across sectors decreased by 3.7%, so that’s a huge difference compared to other sectors. The other thing that’s important to know, you know, is our contribution to GDP as a result decreased pretty significantly. So we were at 10.4% of global GDP, and our share decreased to 5.5% in 2020, due to ongoing restrictions to mobility. In terms of jobs, in 2020 62 million travel and tourism jobs were lost, and that represented a drop in 18.5% in jobs around the world, leaving just 272 million people employed across the sector globally, compared to 334 million in 2019. And the threat of job loss, you know, it continues to persist, particularly as many jobs have been supported by government retention schemes and reduced hours. And without a full recovery of travel and tourism, a lot of jobs could be lost.

Mustafa 05:36

The recovery of the travel tourism hospitality industries is, first and foremost, about saving millions of jobs around the world. The devastating impact of the pandemic on tourism related industries was immediate, and felt almost overnight. Borders were closed to international travel; tourists simply vanished. Lockdowns and restrictions forced restaurants, cafes and many hotels to shut down. The recovery, by contrast, is a slow process that is often dependent on governments’ decisions and pandemic-related regulations, and subject to all sorts of conditions dictated by the evolution of the pandemic. One of the challenges the industry is facing during the recovery is actually luring back employees and filling vacant positions with the right skills. This is an industry that witnessed record numbers of furloughs and job cuts during 2020. Industry leaders tell us that planning for, and operating, during the recovery are not easy tasks. Here’s why:

Ayesha 06:47

Haitham Mattar, managing director of India, Middle East and Africa at IHG Hotels & Resorts:

06:53

So again, we were led by government decisions. So wherever governments have eased on restrictions, increased vaccination levels, as well as had a control on the spread of the pandemic and opening borders, ie Dubai, for example, and then then the UAE as a whole, followed by Qatar’s decision to open up. Then you had Oman and then Saudi Arabia and then you had Kuwait. So all these gave us an opportunity to ramp up our recovery and be ready. Remember, during this pandemic, we all had to make very difficult decisions of sending people home furloughs, unpaid holidays, right? Letting people go, very difficult decisions. Now, once we started to see recovery, we started to plan to bring people back. And of course, that’s a long process, you know, some people already moved on and got their own jobs and were not necessarily ready to come back. So that recovery stage was, was not as easy as it may look like. And the planning for it was not as easy as it may look like because while some countries like the UAE, it was a bit easier to start planning for recovery, as we knew when Emirates was gonna open up, you know, routes again, and when borders were gonna open up, it was not as clear with the other countries when they were going to open up and in some cases, it was almost as sudden as you’ve got a week’s notice when the country is going to open up and you’ve just gotta start planning, right, start planning for increased occupancy and in some cases, we went so low on occupancy, some of our hotels were running at five to 10% occupancy and then you’ve had to get ready for a ramp up of right in a jump into 60, 70 and 80% occupancies. With this, the planning for recovery, as I mentioned, is it doesn’t become as easy as, you know, something, you know, that’s gonna come in the next three four months. Agility is very important, so being agile across the, the regions where we open, ensuring that we get people back together, bring people from abroad, making sure that we’re ready to receive clients, cleanliness sanitisation programmes, touchless contactless check-ins, all was, was really planned. We had a great partner with WTTC, the World Tourism & Travel Council, where we started to work together on certification of clean programmes, and IHG’s Clean Promise, which, you know, was, was something that we went out with to reassure guests and give them that level of confidence to come back through our doors.

Mustafa 09:35

As with many sectors, the pandemic has not only disrupted travel and tourism, it has also reshaped the entire industry. Whether these changes are temporary or lasting remains to be seen. What we have seen so far during 2021 is a clear indication that tourism is still very much reliant on domestic activity and that the opening of borders and the lifting of travel restrictions might need some time before they translate into significant international travel and tourism activity.

What are the latest numbers and projections? And what did they tell us about the recovery of travel, tourism and hospitality? Listen to Tiffany Misrahi of the World Travel & Tourism Council sharing the latest updates:

10:23

There is this realisation that we will need to coexist with the virus. And so our methodology, in terms of our research, looks at both different elements including, obviously, the current restrictions, the approaches of countries but also the vaccination rollout. And where it stands in certain countries. The recovery has been very uneven, if you think about it, across regions, and we’ve definitely, you know, seen the domestic recovery coming first, given mobility restrictions, and have seen signs in different regions around the international recovery. But really, our latest projections, which we just released in October this year, showed that in in 2021, so by the end of the year, the global economy set to receive a modest, you know, 30 30.7 year-on-year increase from travel and tourism, which is slower than expected, and that will only represent 1.4 trillion. And again, like I said, that will be mainly driven by domestic spending. International spending is set to rise by only 9.3% this year, but we are expecting, obviously, a much stronger year-on-year rise for 2022 in terms of international spending, of about 93.8%.

[Etihad Airways, good afternoon, captain speaking. Just about ready to depart; should be away in a couple of minutes or so]

Mustafa 12:15

In 1950, around 25 million people took international flights. By 2019, there were more than 1.5 billion passengers flying to international destinations. Then the pandemic hit. The travel and tourism industry took a frontal shock, causing the number of international tourist arrivals worldwide to drop by a staggering 73% in 2020 compared to 2019. The pandemic and the ensuing travel restrictions have simply brought the travel numbers back to 1989 levels. That’s a 50-year time travel in just a couple of months.

You’re listening to PCR, a special podcast series from The National. I’m Mustafa Alrawi, your host on this episode, where we try to understand the impact of the pandemic on travel tourism and hospitality and where we explore the changes and trends emerging during the post-Covid-19 recovery – PCR.

According to the International Air Transport Association, Iata, the aviation industry lost 138 billion dollars in 2020. In 2021, losses will reduce to $52 billion dollars thanks mainly to a rebound in domestic flights and an increase in cargo business. Optimistic projections put the recovery of the travel and tourism industries to pre-pandemic levels in 2023. The recent pandemic situation in Europe, however, is a reminder that the crisis is cyclical, and that the recovery of the aviation industry in particular is still facing turbulence and headwinds. Other challenges facing the aviation industry include high oil prices and higher airport charges, putting upward pressure on air fares. But the biggest challenge that is already creating some bottlenecks is caused by the shortages of qualified labour. Listen to Willie Walsh, director general of Iata, delivering key remarks on labour shortages during a press briefing in November 2021.

Willie Walsh, director general of Iata: 15:07

We’re certainly seeing some indications in certain countries of a problem with the availability of qualified labour in the industry. Clearly, as a result of the severe downturn in traffic going back to March, when it really kicked in, March, April or April, we saw profit down by about 95%. We have seen a lot of people leave the industry, some on a temporary basis, some on a permanent basis. Attracting talent back into the industry will be a challenge. So I think we as an industry have to make sure that we are continuing to look to means to attract good talent into our businesses. And I think governments clearly can assist in, you know, providing support in, in this area, particularly when it comes to issues like training. But I think this is potentially going to be one of the bottlenecks that we experience as we see traffic ramp up. And certainly we’ve seen reports of this impacting on airlines’ ability to operate in the US domestic markets where the recovery, as we’ve said before, has been quite strong. So it’s an important issue. You know, I’ve spent, what, 42 years, 43 years in this industry. I’ve never seen a situation where there’s been a shortage of labour; we’ve often talked about it potentially happening. But I think this is probably the period when, you know, we could actually see a real shortage of labour that will impact on the industry’s ability to re-establish networks as quickly as they might like to.

Mustafa 17:11

So there are many challenges facing the travel and tourism industry. But the overall situation of the sector has improved. Remember that the pandemic nearly grounded the industry. What we’re seeing today is a recovery that is very much fragmented, varying from one geography to another, and dependent on travel restrictions. And, of course, the specific health situation.

Ayesha 17:34

Tiffany Misrahi, vice president of policy and research, World Travel & Tourism Council:

17:40

As I said, the recovery will be uneven across regions. Our expectation in terms of travel and tourism GDP growth in 2021 is that it will be strongest in the Americas, with 37% growth. And that will be driven by the Caribbean, with 47%. That will be followed by Asia-Pacific at 36.3. But most of these markets will be driven by strong domestic spending growth. To give you a breakdown and comparison by geography, here’s the expected travel and tourism GDP growth rates for 2021. So Africa will be at 27.7%; the Middle East at 27.1; Europe will be at 23.9; and the Caribbean at 47.3; Latin America at 26%; North America at 37.9%. So what’s interesting, though, is that in 2022, we forecast slightly different growth. So this is obviously year on year. So the Middle East, well, actually, is forecasted to increase in 2022 by 28.1%. Europe by 38 Asia-Pacific by 35.8% and North America by 26.4%. What’s also interesting is that the strongest international spending growth in 2021 is expected to be in the Caribbean region. And that the second though the second-fastest growth expected is actually in the Middle East in terms of international spending, with 37.9% international spending growth.

Mustafa 19:35

The pandemic has changed our lives in many ways. Lockdowns and long, stressful months of restrictions have transformed our needs, and maybe even created a renewed focus on our sense of well-being. Hospitality leaders tell us that there are already new trends emerging. There are clear signs that travellers and customers have new preferences when it comes to choosing where and how they stay in hotels. The hospitality business is shifting, too. The pandemic has been hugely disruptive for the tourism industry. The post-Covid-19 recovery is already proving to be transformative. Here’s what to expect in the hospitality industry:

Ayesha 20:20

Haitham Mattar, managing director of India, Middle East and Africa at IHG Hotels & Resorts:

20:26

They changed in the way they search, they changed the way the book, they changed the way they check in and they changed the way they, actually, stay in hotels and in what actually they look for in terms of holiday, right. So we saw a greater demand in outdoor and adventure, we saw a greater demand of family connections, we’ve seen greater demand of people looking for luxury individualism tailor-made, bespoke services. We’ve seen people move away from the sort of all-day dining buffets, and more into, you know, bespoke a la carte menus. All of that helped us as an industry readjust, right, and make sure that we feature what this new, if you like, demand of consumers are looking for. There’s a lot of things that will stay on with us. And a lot of things will probably, you know, move away. So hopefully the masks will, will go away, with, they won’t stay. I’m pretty sure all the barriers that you have, a check-in reception, will go away. But things you know, such as digital transformation across a property will certainly stay with us forever.

People are now looking for hotels that are more boutique, less in a big group hotels, less big lobbies, more individual service. You know, the recent studies also show people are more looking for villa products where they can have more privacy of their own, and less contamination of you know, other, other guests or interactions with many other guests. I think we see from recent studies that, in, eh, large group tours will probably fade away, it’ll be more smaller groups close to friends and family. And that sense, you know that whole travel and tourism and hospitality is going to change going forward. And people may not want to go back to that because Covid has created this instinct in humanity where “I want my space”. And I think that space is going to remain, regardless of how you look at it right now. In a restaurant, where you see that two-metre space, you actually like it and you want that space, you don’t want that person coming back closer to you. You get an elevator now and there are six people and you’re uncomfortable, right? You want that space. And I think that’s going to change the way hotels are going to be designed in the future going forward. How do we how do we look at hotel designs in the future to accommodate this human instinct of change? Right? That is, doesn’t necessarily just sit with, you know, where do we eat? And how do we go and where do we stay? But it’s actually “How do we stay?” and how do we feel comfortable in an environment that is not necessarily you know, somebody breathing my own air?

Mustafa 23:16

The new trends emerging in the hospitality industry a part of a wider change observed elsewhere in the travel and tourism sectors. Some of these trends might be transitory, depending on the current pandemic evolution, but there are certainly deeper, lasting changes that will transform the way people travel, what they expect and the kind of experience they’re looking for.

Ayesha 23:43

Tiffany Misrahi, vice president of policy and research, World Travel & Tourism Council:

23:48

So, obviously in the short to medium term, we see a real trend towards domestic rediscovery. So with ongoing restrictions, consumers have really looked for travel experiences and explored within the borders of the destinations that they call home. So the concept of a staycation has taken on a new meaning in this area, but also consumers are creating “workcations” and increasingly staying longer in destinations. I think there’s this real desire for authentic experiences and being connected to the places that you go to. People are looking for increased flexibility. And that can mean, you know, obviously flexibility to work from anywhere. Following the period of lockdown and isolation, travellers are showing a preference to travel to, perhaps, less crowded or even unfamiliar destinations. And so we’ve seen an increased interest in exploring, you know, secondary, tertiary and even rural destinations or nature-based destinations. It’s in, I think, in that context we’ve seen travellers become a lot more committed to sustainability, which is affecting their travel choices and, you know, the lockdown have shown and put the spotlight on the importance of wellness, mental health and overall health. And, you know, it’s driving more consumers to seek out wellness experiences. At the same time, obviously, as a consumer concerns around Covid-19 and their health persists, it’s really important for travellers today to be able to trust their travel partners to provide them with the knowledge of virus prevention measures and make sure that those are in place. We’ve obviously seen, also, a real, real acceleration when it comes to the digital agenda. And I think, you know, that obviously ties to the conversation we were having earlier around, around technology and changes in business models. But technology will continue to play an even more important role as an enabler of a safe and seamless traveller experience. And so in that context, it’s going to be really important for governments to invest in the digital infrastructure of emerging destinations and in remote areas, but also enhance digital skills within local communities. And at the same time, obviously, how do we create those contactless experiences and frictionless experiences?

Mustafa 26:39

Whenever travel restrictions are lifted, people return to restaurants and cafes, and once again stay in hotels. For now, it seems that domestic tourism is performing well. International travel, however, is still lagging. Virus fear and other travel restrictions are complicating matters for the international travel industry and adding uncertainties to the recovery. What is certain, however, is that the future of travel and tourism is very much related to the evolution of the pandemic, and highly dependent on governments’ decisions and regulations. 2021 has seen a significant improvement in these sectors. 2022 will determine how long it will take for travel and tourism to recover to pre-pandemic levels. If you liked this episode, or this series, please do subscribe at Apple Podcasts, Spotify or wherever you get your audio content.

Updated: December 23rd 2021, 11:04 AM